Danedri Thompson
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Sales taxes are bringing in less revenue than they did last year, and that could create challenges for Gardner and Edgerton as the communities enter budget season.
“It’s a significant revenue source,” Melissa Mundt, Gardner assistant city administrator, said. “It’s almost as significant as property tax. There are two major revenue streams between property and sales. They make up more than 50 percent of our revenues.”
A significant portion of both cities’ budgets is comprised of sales taxes. In Edgerton, sales taxes make up approximately 19 percent of the budget. In Gardner, sales taxes make up approximately 30 percent of the budget.
Although revenues are off, there are bright spots in both cities. In Edgerton, property taxes from the annexation of the KCP&L facility will more than make up the difference in lost sales tax revenue.
In 2009, Edgerton collected about $393,000 in property taxes without the KCP&L addition. Now that the facility is officially on the tax rolls, it will contribute approximately $615,000 in taxes to the city’s revenue stream.
In Gardner, the picture isn’t quite as rosy, however, the city’s portion of sales tax collections are slightly higher than they were last year.
“We don’t know if that will continue throughout the year,” Mundt said. “There’s so little continuity or stability in it. It’s volatile. It used to be up, up, up, up.”
When a consumer buys a product in Gardner, they pay a 9.025 percent sales tax (A one-cent increase in the state’s tax rate bumped the rate from 8.025 to 9.025 percent on July 1). If a consumer buys a product in Gardner for $1, their bill will come to $1.09. Of that, 6.3 cents will go to the state of Kansas; half a cent will go to Johnson County; one-tenth of a cent will be dedicated to Johnson County Stormwater; a quarter cent will be dedicated to Johnson County law enforcement; .125 of a cent goes to the Johnson County Research Triangle; a full cent goes to the city of Gardner’s general fund; and another half cent goes to the city’s parks.
Cities have the option of levying their own sales taxes in addition to levies from the state and the county. The cities in Johnson County split a half cent general Johnson County sales tax. They also receive a share of a quarter cent law enforcement tax. The county uses its share of that tax for law enforcement, but cities can use their portion however they see fit. For example, Gardner has been using the funds generated from the tax to pay down debt on the aquatic center and Celebration Park.
Mundt said Gardner’s county tax share is down significantly. While Gardner’s own sales tax is projected to generate about $10,000 more in 2010 than it did in 2009. Overall however, the city is projecting $195,000 less in total sales tax revenues.
Mundt said it’s difficult to speculate why the city of Gardner is coming out ahead on its own taxes but falling behind on county levied taxes. However, she said most retail stores in Gardner sell base-level consumer goods – like groceries.
“We’re selling goods that people have to buy,” she said. “If you get outside of Gardner, Edgerton or Spring Hill, and you get into Leawood, Mission Hills or Overland Park, people aren’t spending on luxury items. People aren’t buying the high-end consumer goods. That could be anything from a car to a jacket at Coldwater Creek.”
The dismal county sales tax revenues are a larger problem for Edgerton as the city has few retail establishments and relies largely on county-shared sales tax revenues.
Mundt said she can’t say whether the current dismal sales tax picture is likely to continue indefinitely.
“We don’t know if this is the new normal,” she said. “Every time something comes out on the economy it causes people to pull back and not spend. Other cities are seeing similar.”